Excersise 12-1: Best Buy

Weekly demand for Motorola cell phones at a Best Buy store is normally distributed with a mean of 300
and a standard deviation of 200. Motorola takes two weeks to supply a Best Buy order. Best Buy is
targeting a cycle service level of 95 percent and monitors its inventory continuously. How much safety
inventory of cell phones should Best Buy carry? What should their reorder point be?

Inputs
Average demand per unit time R =
Lead time, L =
SD of demand per unit time sR =
Target cycle service level

300
2
200
0.95

Distribution of demand during lead time

Mean demand during lead time R L =
SD of demand during lead time sL =

600
283

Output
Safety Inventory ss =
Reorder point R =

465
1065

Reorder Point Increment =

Cycle Service Level & Inventory
Reorder
Safety
Point ROP
Inventory ss
600
610
620
630
640
650
660
670
680
690
700
710
720
730
740
750
760
770
780
790
800
810
820
830
840
850
860
870
880
890
900
910
920
930
940
950
960
970
980
990
1000
1010
1020
1030
1040
1050
1060
1070
1080
1090
1100
1110
1120
1130
1140
1150
1160
1170
1180
1190
1200
1210
1220
1230
1240
1250
1260

CR - 11/24/2014 7:08 AM

10

0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190
200
210
220
230
240
250
260
270
280
290
300
310
320
330
340
350
360
370
380
390
400
410
420
430
440
450
460
470
480
490
500
510
520
530
540
550
560
570
580
590
600
610
620
630
640
650
660

Cycle Service
Level (CSL )
0.5000
0.5141
0.5282
0.5422
0.5562
0.5702
0.5840
0.5977
0.6114
0.6248
0.6382
0.6513
0.6643
0.6771
0.6897
0.7021
0.7142
0.7261
0.7377
0.7491
0.7602
0.7711
0.7817
0.7919
0.8019
0.8116
0.8210
0.8301
0.8389
0.8474
0.8556
0.8635
0.8711
0.8783
0.8853
0.8920
0.8985
0.9046
0.9104
0.9160
0.9214
0.9264
0.9312
0.9358
0.9401
0.9442
0.9481
0.9517
0.9552
0.9584
0.9615
0.9643
0.9670
0.9695
0.9719
0.9741
0.9761
0.9781
0.9798
0.9815
0.9831
0.9845
0.9858
0.9870
0.9882
0.9892
0.9902

Page 1

252626694.xlsx.ms_office - VALUES

Cycle Service Level vs. Safety Stock

1.0000
0.9500
0.9000
0.8500
0.8000
0.7500
0.7000

CycleService Level

0.6500
0.6000
0.5500
0.5000
0.4500
0.4000
0.3500

0.3000
0.2500
0.2000
0.1500
0.1000
0.0500
0.0000
0

100

200

300

400
Safety Stock

500

600

700

Excersise 12-1: Best Buy

Weekly demand for Motorola cell phones at a Best Buy store is normally distributed with a mean of 300 and a standard deviation of 200. Motorola takes two weeks to supply a Best Buy order. Best Buy is
targeting a cycle service level of 95 percent and monitors its inventory continuously. How much safety inventory of cell phones should Best Buy carry? What should their reorder point be?

Inputs
Average demand per unit time R =
Lead time, L =
SD of demand per unit time sR =
Target cycle service level

300
2
200
0.95

Distribution of demand during lead time

Mean demand during lead time R L =
SD of demand during lead time sL =

=C12*C13
=C14*SQRT(C13)

Output
Safety Inventory ss =
Reorder point R =

=NORMSINV(C15)*C19
=C22+C18

Reorder Point Increment =

10

Cycle Service Level & Inventory

Reorder
Point ROP
=+$C$13*$C$12
=+A30+$C$25
=+A31+$C$25
=+A32+$C$25
=+A33+$C$25
=+A34+$C$25
=+A35+$C$25
=+A36+$C$25
=+A37+$C$25
=+A38+$C$25
=+A39+$C$25
=+A40+$C$25
=+A41+$C$25
=+A42+$C$25
=+A43+$C$25
=+A44+$C$25
=+A45+$C$25
=+A46+$C$25
=+A47+$C$25
=+A48+$C$25
=+A49+$C$25
=+A50+$C$25
=+A51+$C$25
=+A52+$C$25
=+A53+$C$25
=+A54+$C$25
=+A55+$C$25
=+A56+$C$25
=+A57+$C$25
=+A58+$C$25
=+A59+$C$25
=+A60+$C$25
=+A61+$C$25
=+A62+$C$25
=+A63+$C$25
=+A64+$C$25
=+A65+$C$25
=+A66+$C$25
=+A67+$C$25
=+A68+$C$25
=+A69+$C$25
=+A70+$C$25
=+A71+$C$25
=+A72+$C$25
=+A73+$C$25
=+A74+$C$25
=+A75+$C$25
=+A76+$C$25
=+A77+$C$25
=+A78+$C$25
=+A79+$C$25
=+A80+$C$25
=+A81+$C$25
=+A82+$C$25
=+A83+$C$25
=+A84+$C$25
=+A85+$C$25
=+A86+$C$25
=+A87+$C$25
=+A88+$C$25
=+A89+$C$25
=+A90+$C$25
=+A91+$C$25
=+A92+$C$25
=+A93+$C$25
=+A94+$C$25
=+A95+$C$25

CR - 11/24/2014 7:08 AM

Safety
Inventory ss
=+A30-$C$18
=+A31-$C$18
=+A32-$C$18
=+A33-$C$18
=+A34-$C$18
=+A35-$C$18
=+A36-$C$18
=+A37-$C$18
=+A38-$C$18
=+A39-$C$18
=+A40-$C$18
=+A41-$C$18
=+A42-$C$18
=+A43-$C$18
=+A44-$C$18
=+A45-$C$18
=+A46-$C$18
=+A47-$C$18
=+A48-$C$18
=+A49-$C$18
=+A50-$C$18
=+A51-$C$18
=+A52-$C$18
=+A53-$C$18
=+A54-$C$18
=+A55-$C$18
=+A56-$C$18
=+A57-$C$18
=+A58-$C$18
=+A59-$C$18
=+A60-$C$18
=+A61-$C$18
=+A62-$C$18
=+A63-$C$18
=+A64-$C$18
=+A65-$C$18
=+A66-$C$18
=+A67-$C$18
=+A68-$C$18
=+A69-$C$18
=+A70-$C$18
=+A71-$C$18
=+A72-$C$18
=+A73-$C$18
=+A74-$C$18
=+A75-$C$18
=+A76-$C$18
=+A77-$C$18
=+A78-$C$18
=+A79-$C$18
=+A80-$C$18
=+A81-$C$18
=+A82-$C$18
=+A83-$C$18
=+A84-$C$18
=+A85-$C$18
=+A86-$C$18
=+A87-$C$18
=+A88-$C$18
=+A89-$C$18
=+A90-$C$18
=+A91-$C$18
=+A92-$C$18
=+A93-$C$18
=+A94-$C$18
=+A95-$C$18
=+A96-$C$18

Cycle Service
Level (CSL )
=NORMDIST(A30,$C$18,$C$19,1)
=NORMDIST(A31,$C$18,$C$19,1)
=NORMDIST(A32,$C$18,$C$19,1)
=NORMDIST(A33,$C$18,$C$19,1)
=NORMDIST(A34,$C$18,$C$19,1)
=NORMDIST(A35,$C$18,$C$19,1)
=NORMDIST(A36,$C$18,$C$19,1)
=NORMDIST(A37,$C$18,$C$19,1)
=NORMDIST(A38,$C$18,$C$19,1)
=NORMDIST(A39,$C$18,$C$19,1)
=NORMDIST(A40,$C$18,$C$19,1)
=NORMDIST(A41,$C$18,$C$19,1)
=NORMDIST(A42,$C$18,$C$19,1)
=NORMDIST(A43,$C$18,$C$19,1)
=NORMDIST(A44,$C$18,$C$19,1)
=NORMDIST(A45,$C$18,$C$19,1)
=NORMDIST(A46,$C$18,$C$19,1)
=NORMDIST(A47,$C$18,$C$19,1)
=NORMDIST(A48,$C$18,$C$19,1)
=NORMDIST(A49,$C$18,$C$19,1)
=NORMDIST(A50,$C$18,$C$19,1)
=NORMDIST(A51,$C$18,$C$19,1)
=NORMDIST(A52,$C$18,$C$19,1)
=NORMDIST(A53,$C$18,$C$19,1)
=NORMDIST(A54,$C$18,$C$19,1)
=NORMDIST(A55,$C$18,$C$19,1)
=NORMDIST(A56,$C$18,$C$19,1)
=NORMDIST(A57,$C$18,$C$19,1)
=NORMDIST(A58,$C$18,$C$19,1)
=NORMDIST(A59,$C$18,$C$19,1)
=NORMDIST(A60,$C$18,$C$19,1)
=NORMDIST(A61,$C$18,$C$19,1)
=NORMDIST(A62,$C$18,$C$19,1)
=NORMDIST(A63,$C$18,$C$19,1)
=NORMDIST(A64,$C$18,$C$19,1)
=NORMDIST(A65,$C$18,$C$19,1)
=NORMDIST(A66,$C$18,$C$19,1)
=NORMDIST(A67,$C$18,$C$19,1)
=NORMDIST(A68,$C$18,$C$19,1)
=NORMDIST(A69,$C$18,$C$19,1)
=NORMDIST(A70,$C$18,$C$19,1)
=NORMDIST(A71,$C$18,$C$19,1)
=NORMDIST(A72,$C$18,$C$19,1)
=NORMDIST(A73,$C$18,$C$19,1)
=NORMDIST(A74,$C$18,$C$19,1)
=NORMDIST(A75,$C$18,$C$19,1)
=NORMDIST(A76,$C$18,$C$19,1)
=NORMDIST(A77,$C$18,$C$19,1)
=NORMDIST(A78,$C$18,$C$19,1)
=NORMDIST(A79,$C$18,$C$19,1)
=NORMDIST(A80,$C$18,$C$19,1)
=NORMDIST(A81,$C$18,$C$19,1)
=NORMDIST(A82,$C$18,$C$19,1)
=NORMDIST(A83,$C$18,$C$19,1)
=NORMDIST(A84,$C$18,$C$19,1)
=NORMDIST(A85,$C$18,$C$19,1)
=NORMDIST(A86,$C$18,$C$19,1)
=NORMDIST(A87,$C$18,$C$19,1)
=NORMDIST(A88,$C$18,$C$19,1)
=NORMDIST(A89,$C$18,$C$19,1)
=NORMDIST(A90,$C$18,$C$19,1)
=NORMDIST(A91,$C$18,$C$19,1)
=NORMDIST(A92,$C$18,$C$19,1)
=NORMDIST(A93,$C$18,$C$19,1)
=NORMDIST(A94,$C$18,$C$19,1)
=NORMDIST(A95,$C$18,$C$19,1)
=NORMDIST(A96,$C$18,$C$19,1)

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252626694.xlsx.ms_office - FORMULAS